Mayor of London calls for fair funding deal for the capital

19 July 2012

The Mayor of London, Boris Johnson, today announced the creation of the London Finance Commission to examine how the capital could keep a greater share of the growing tax revenues Londoners generate for the public purse.

Chaired by leading academic Professor Tony Travers, from the London School of Economics, the commission will examine the potential for London to keep more of the revenue from the taxes that Londoners pay within the capital.

The commission has been set up by the Mayor as part of a key manifesto pledge he made to lobby the Government to ensure that London gets back in funding a fair share of what it contributes to the national purse.

He has invited a panel of finance and local government specialists to examine how the current way of funding London can be improved to help to secure its future as the world’s leading big city, driving jobs and growth and boosting the capital’s economy.

The Mayor of London, Boris Johnson, said: “The capital must not be seen simply as a cash cow for the rest of the UK and the time has come for London to take greater control of its own destiny. I firmly believe that Londoners should see more of the growing tax revenues they generate for the public purse staying here in the capital. “Whether it's Crossrail or Tube upgrades I have consistently had to make the case to Government to secure the vital investment that benefits not just London, but the wider UK economy as well. These negotiations have convinced me that there has to be a better way to fund this great city and the London Finance Commission will shine a spotlight on how it could be done."

Tony Travers, Chair of the London Finance Commission, said: “The London Finance Commission will provide a great opportunity to look at how the government of London can reasonably have more control over the taxes paid in the capital. It will also allow the capital to be compared with cities overseas. Many of these, such as New York and Berlin, have far greater financial freedom than London. “It is important to stress that the Commission will not argue for London to take resources from other parts of the UK. But it will examine the possibility that the city could keep a greater share of any growth in the tax-base. The government and Opposition have both stated they favour more freedom for English cities. The Commission will analyse the case for London taking a significant step towards the kind of autonomy enjoyed by Scotland and Wales."

Mayor Jules Pipe, Chair of London Councils, said: “At a time when there are serious financial pressures on the boroughs and the services they provide right across London, it is vital that we work together to face the economic challenges. The Commission provides a valuable forum in which to debate an improved funding model for local government in London – one that will allow cash-strapped local authorities to properly fund critical local public services.”

Notes to editors

1. London has previously contributed up to £14-19 billion to the rest of the country through a tax export. It continued to generate a tax export even during the recession.

See here for more information: http://217.154.230.218/NR/rdonlyres/E6EFAB4A-12FA-46FA-BA95-AC7A8C47B8B4/0/LPUK_200910.pdf2

2. Research by the Centre for Economics and Business Research has also shown that £1 in every 5 earned in London subsidises the rest of the UK, a net subsidy of around 20 per cent.

See here for more information: http://www.cebr.com/wp-content/uploads/Regional-surplus-and-deficits-Compatibility-Mode.pdf

3. The Commission will report its findings by spring 2013. Its members include the following: Tony Travers (LSE), Jules Pipe (Chair of London Councils), Teresa O'Neill (Vice Chair of London Councils), John Biggs (London Assembly), Chris Duffield (City of London), Nick Holgate (Finance Director at Kensington & Chelsea), Bridget Rosewell (Volterra Consulting), Alexandra Jones (Chief Executive Centre for Cities), Mike Emmerich (New Economy Manchester and City Finance Commission), Gerald Jones (former Chief Executive of Wandsworth Council), Stephen Hughes (Chief Executive, Birmingham City Council), Sir Stuart Lipton (chaired the City Finance Commission), Martin Smith (Chief Executive of London Borough of Ealing; Chief Executives' London Committee lead on finance), Steve Freer (Chartered Institute of Public Finance and Accountancy) and Roger Bright (former Chief Executive of the Crown Estate).

4. The objectives of the initial inquiry will be to: (i) Describe and assess existing government funding arrangements for the capital, including: how they compare to other countries, regions and cities internationally and in the UK; and how revenues raised are distributed locally, regionally and nationally.

(ii) Examine the relative scale and distribution of London’s public expenditure, within the context of the wider Greater South East region, with a view to considering the plausibility of a ‘Barnett Formula’ style settlement for the capital.

(iii) Examine options for change, including especially the potential to devolve to London more of the taxes Londoners and London businesses pay.

4. Tony Travers biography: Tony Travers is Director of British Government @LSE and co-director of LSE London, a research centre at the London School of Economics. His key research interests include local and regional government, London and public service reform. He is currently an advisor to the House of Commons Communities and Local Government Select Committee and has previously advised a number of other select committees.

He is a research board member of the Centre for Cities and a board member of the New Local Government Network. He is an Honorary Member of the Chartered Institute of Public Finance & Accountancy. He was a Senior Associate of the Kings Fund from 1999 to 2004, and also a member of the Arts Council’s Touring Panel during the late 1990s. From 1992 to 1997, he was a member of the Audit Commission. He was a member of the Urban Task Force Working Group on Finance. He has published a number of books on cities and government and writes and broadcasts for the national press.ENDS

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